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In re Suspension or Revocation of Certificate of Fred F. Heller

Decided: January 20, 1977.


For affirmance as modified -- Chief Justice Hughes, Justices Mountain, Sullivan, Pashman and Clifford and Judge Conford. Dissenting and concurring in part -- Justice Schreiber. The opinion of the court was delivered by Hughes, C.J. Schreiber, J. (dissenting and concurring in part).


This appeal concerns a decision and order of the New Jersey State Board of Pharmacy (N.J.S.A. 45:14-1 et seq.) revoking the certificate of a registered pharmacist, Fred F. Heller, R.P., revoking the permit to conduct a pharmacy of Carfred, Inc., trading as Heller Pharmacy, and assessing a "civil penalty" of $50,472 jointly against both. Fred F. Heller is President of Carfred, a closely-held corporation, and was pharmacist-in-charge of Heller Pharmacy.

An appeal was taken to the Appellate Division, R. 2:2-3(2), which affirmed both revocations and penalty assessment. 150 N.J. Super. 25 (1975). Although the judges were unanimous as to the validity of the revocations, Judge Crane dissented as to that of the penalty assessment. We granted certification, 69 N.J. 383 (1976), in order to deal with both issues.

The Board of Pharmacy had issued a complaint charging that appellants, during a period between May 1973 and October 1974, sold improperly more than 18,000 fourounce

bottles of codeine-based cough syrup. This material was classified as a "controlled dangerous substance" under Schedule V of N.J.A.C. 8:65-10.1, promulgated pursuant to N.J.S.A. 24:21-3. It was permitted to be legally dispensed without prescription under standards set forth in N.J.A.C. 8:65-7.19, including recordation of such sales in a bound record book (an "Exempt Narcotics" book). The complaint charged that this volume of sales was "in gross excess" of the legitimate medical needs of the purchasers; that appellants failed to exercise proper professional judgment in making these sales, and that they sold the substances at unconscionable prices. It charged that such activities were not in good faith, were without medical justification or recognized and legitimate cause, and constituted grossly unprofessional conduct in violation of N.J.S.A. 45:14-12.

In a separate count the Board charged that the sale of these substances for a unit price of $8 per four-ounce bottle constituted a retail "mark-up" of 400 percent or five times the wholesale cost of a four-ounce bottle of such substances; and that the sale of the substances at such price was unconscionable and constituted grossly unprofessional conduct in violation of the statute. The complaint sought by way of remedy the suspension or revocation of appellants' licenses to practice pharmacy and to operate a drug store. Both the complaint and the notice of hearing thereunder were silent, however, as to any claim for the assessment of civil penalties.

The Board, after hearing extensive testimony, determined that appellants were guilty of grossly unprofessional conduct and practices. It concluded that during the interval mentioned the appellants had realized ("grossed") $100,944, "half of which or $50,472 is the minimum amount of unjust profit" gained from "unprofessional practices and pricing."

The Board adjudged appellants guilty of all charges and entered an order revoking the permit of Heller Pharmacy

to conduct a pharmacy and the certificate of Heller to practice pharmacy. It further ordered:

That Heller Pharmacy and Fred Heller R.P., are herewith and hereby assessed a civil penalty in the amount of $50,472, which amount is equal to the minimum amount of unjust profit derived by Fred Heller, R.P., by means of grossly unprofessional conduct.

The following evidence taken at the administrative hearing (at which Heller did not testify but offered three "character" witnesses) was relied upon by the Board in its ultimate decision that Heller was guilty of "grossly unprofessional conduct."

Heller Pharmacy is a relatively low-volume drug store, reporting only 10,582 prescription sales in 1973 and 9,536 in 1974. Located in a declining urban neighborhood in Newark, it experienced a 5,000 item drop in prescription sales from 1971 to 1974. In October 1974 a New Jersey Department of Health field representative conducted an accountability audit of Heller's sales of Schedule V cough preparations. The audit revealed that Heller had sold 18,766 four-ounce bottles of these cough preparations between May 1, 1973, and October 16, 1974. Heller had scrupulously maintained his "Exempt Narcotics" record and had observed the other formalities relevant to Schedule V sales. He insisted on making all the sales personally, as well as meticulously recording them. He would not sell to a given customer more frequently than once every 48 hours.

The purchasers were primarily not regular prescription customers; a third of them lived outside the city; half of the purchasers bought these drugs on a regular basis, some buying a bottle every third day. They bought the cough syrup from Heller "because it was hard to get and not many other people sold it." A former employee who had observed Heller making thousands of sales testified that Heller had indicated to him that people could get "high" (a slang term for drug intoxication) on the medication, although the witness quibbled as to Heller's use of that

precise word. Heller rarely inquired about the purchaser's health. He sold an equal volume of the medication in summer and winter months.

Several established pharmacists testified that they were much more guarded in such sales and made substantially fewer of them. They also testified that significantly more such medications were called for and dispensed in the winter months. As compared to Heller's unit price of as high as $8, the other pharmacists sold at a range of $1.69 to $3. The wholesale cost to the pharmacy ranged from $1.20 to $1.75 per bottle.

On this factual base the Board determined that Heller had pandered to those intending an illicit and non-medical use*fn1 of the medications, had realized unconscionable profits therefrom, and consequently had been guilty of grossly unprofessional conduct and was justly subjected to the sanctions imposed.

The appeal projects two basic issues: (1) Was the revocation of appellants' professional licenses for "grossly unprofessional conduct" valid? (2) Was the imposition of a civil penalty in the amount of $50,472 a valid exercise of the Board's remedial powers in these circumstances?

Appellants contend that they violated no specific statute or Board regulation concerning the manner in which non-prescription Schedule V drugs may be sold. Because their conduct is neither expressly proscribed by the Pharmacy Act, nor included in the particularized definitions of "grossly unprofessional conduct" under N.J.S.A. 45:14-12(a)-(f), they question the authority of the Board to revoke their licenses. Innocence of intent to commit a wrongful act is apparent, say appellants, because Heller kept such a complete record of the sales of these substances.

The last quoted statute empowers the Board to withhold, suspend or revoke a pharmacist's license for specific acts or conditions, including conviction of violating certain laws, chronic inebriety, drug addiction, adulteration of drugs, and incompetency. In addition the law provides that the Board may

suspend or revoke the certificate of a registered pharmacist * * * upon proof satisfactory to the board that such registered pharmacist * * * is guilty of grossly unprofessional conduct and the following acts are hereby declared to constitute grossly unprofessional conduct for the purpose of this act. [ N.J.S.A. 45:14-12].

There follows a list of six types of activity which include (a) paying rebates to any person for recommending the services of another person; (b) providing physicians with prescription blanks bearing the pharmacist's name; (c) advertising the sale of prescription drugs and narcotics at discount rates; (d) claiming professional superiority in the compounding or filling of prescriptions; (e) fostering the interests of one group of patients at the expense of another, and (f) distributing premiums or rebates in connection with the sale of drugs and medications.

The appellants assert that the Legislature intended this list to be exclusive and that since their conduct did not specifically fall within any of these categories, it may not be deemed "grossly unprofessional conduct" for purposes of a revocation proceeding. In that argument they rely heavily upon the decision of the Pennsylvania Supreme Court in Pennsylvania State Bd. of Pharmacy v. Cohen, 448 Pa. 189, 292 A.2d 277 (1972), dealing with a similar statute. In that case the State Board of Pharmacy had suspended a pharmacist's license after finding him guilty of "grossly unprofessional conduct." He was found to have sold quantities of items used in connection with drug abuse. On appeal the Supreme Court reversed, holding that because the pharmacist's conduct did not violate any of the 13 specific prohibitions delineated as constituting

grossly unprofessional conduct the State Board had exceeded its authority by suspending the license. 292 A.2d at 280.

The rationale of the Pennsylvania decision was that the statutory scheme evinced a "legislative intention to provide clear advance notice of the enumerated grounds for imposition of sanctions by the Board" and that a contrary conclusion would render the entire statute constitutionally suspect on grounds of vagueness and failure to provide adequate notice and a clear description of the proscribed conduct. That court believed that the regulatory function of defining prohibited conduct may not be accomplished on an ad hoc basis but may only be achieved through formal rule-making procedures.

Other jurisdictions have taken a position contrary to the Cohen court. In Kansas State Bd. of Healing Arts v. Foote, 200 Kan. 447, 436 P. 2d 828 (Sup. Ct. 1968), for example, a State Board had revoked a physician's license by reason of his "extreme incompetence" despite the fact that extreme incompetence was not one of 15 specific acts constituting "unprofessional conduct" under the governing statute. In affirming the decision of the Board, the Supreme Court rejected the suggestion that the Board had unlawfully created an additional ground of revocation:

The objective always in statutory construction is to ascertain and give effect to legislative intent. In so doing, where police power is to be exercised, we must fairly read the entire context of legislation on the subject, rather than only an isolated section, and consider the object of that legislation and the evils or mischief sought to be prevented or remedied. * * *

The whole purpose and tenor of the healing arts act is the protection of the public against unprofessional, improper, unauthorized and unqualified practice of the healing arts. The goal is to secure to the people the services of competent, trustworthy practitioners. The act seeks to do this through licensure. * * * Considering the entire policy expressed in the act, we believe the legislature, by enumerating certain acts and classifying them as unprofessional conduct, did not thereby intend to exclude all other acts or conduct in the practice of the healing arts which by common understanding render the holder of a license unfit to practice. It would indeed be

difficult, not to say impractical, in carrying out the purpose of the act, for the legislature to list each and every specific act or course of conduct which might constitute such unprofessional conduct of a disqualifying nature. [436 P. 2d at 833 (emphasis added)].

In State ex rel. Lentine v. State Bd. of Health, 334 Mo. 220, 65 S.W. 2d 943 (Sup. Ct. 1933), a doctor's license was revoked for his having participated in a scheme to sell medical licenses. Relying upon a Missouri statute similar to ours, the State Board of Health deemed this activity "unprofessional and dishonorable conduct" although the sale of medical licenses was not among the specifically enumerated acts of unprofessional conduct listed in the statute. 65 S.W. 2d at 945.

The Supreme Court of Missouri upheld the Board, noting that by particularizing certain acts the ...

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